By Louise Lazear
Near patient testing poised for growth
The segment of the IVD industry serving the physician office laboratory (POL) offers products that range from disposables and CLIA- waived test kits to point-of-test chemistry and hematology analyzers. POLs have faced their set of challenges: market acceptance of products and user skill levels, issues of cost and profitability, and of course, a changing regulatory environment. Some IVD manufacturers see these challenges as opportunities with potential for high growth. Others see POLs as an ancillary portion of their core business platform. Fueling the drive toward enhanced POL testing are increasing numbers of CLIA-waived products, the development of smaller, faster, more foolproof analyzers, and the interest in more efficient patient screening and improved access to care. Reimbursement policies and regulatory acceptance remain the unseen road conditions ahead.
According to the Centers for Medicare and Medicaid Services (CMS and formerly HCFA), close to 171,000 laboratories in the U.S. are registered under CLIA. Of those, approximately 96,000 are POLs, representing 56 percent of the total registered. Approximately 45 percent of POLs operate under a waiver application, followed by 32 percent under provider-performed microscopy, 16 percent under compliance, and seven percent under an accreditation application.
Defining the POL market in terms of annual sales revenue is complicated: the wide range of products and use of third party distributors make it difficult even for vendors to determine. According to various sources, the bulk of POL testing involves cholesterol, glucose, urinalysis, hemoglobin/hematocrit, and rapid strep. Best-guess estimates from industry sources put U.S. annual sales in this segment at between $700 and $900 million, and many think that figure is poised to grow.
Near-patient testing
“Our philosophy is to bring the test closer to the patient, getting the results to the patient as soon as possible,” said Joseph Cholko with the marketing department at Quidel Corporation in San Diego, California. ”In fact, we see more and more physicians wanting to perform in-office testing. More physicians are moving into large group practices that have the infrastructure to offer this service to their patients.” Quidel conducted focus groups among physicians to understand where the market is headed. In general, most participants agreed that in-office testing can provide for better patient outcomes, and gives the physician the personal satisfaction of being able to manage the patient’s care.
Richard McCauley, M.D., medical director for primary care diagnostics with Beckman Coulter of Fullerton, California, described the ideal test menu for a physician’s office as encompassing those tests whose results lead to treatment or non-treatment decisions while the patient is in the office. “Any test that can actuate a treatment response, or rule one out,” he said, “is better done near the patient.” A small number of tests comprise the vast majority of what a physician will order, and that menu, McCauley said, can be developed for an office setting.
Cost and profitability, however, are major concerns. As John Favara, marketing manager for point-of-care at BD Diagnostics of Franklin Lakes, New Jersey, pointed out, “Revenue comes when a physician is reimbursed for a test, and only then can a manufacturer sell a product.”
Cholko added that several other factors are driving this market, including the availability of more waived products. While the number of CLIA-waived products is increasing, the current definition of a waived product is under scrutiny by the FDA. In August 1999, in response to legislation enacted by congress, the FDA informed IVD manufacturers that the responsibility for categorization of tests under CLIA would be transferred from the CDC to the FDA. As a result of this new oversight responsibility, the FDA has explored the possibility of imposing additional restrictions on CLIA-waived products. Currently, the FDA is formalizing final rules for public comment. Because of this uncertainty, some manufacturers are hesitant to incur the cost of new CLIA-waived products until these regulations have been sorted out.
While some focus on CLIA-waived products, other companies see the POL as a developing market for moderately complex desktop platforms with broad menus designed for primary care as well as specialty applications. “We are definitely seeing a change in the market,” said Grant Frazier, vice president of marketing at Careside, Inc of Culver City, California. “In the 1970s and 1980s, about one in four physician offices were performing their own testing. After CLIA came into effect in the early 1990s, this figure dropped to about one in ten. With an increased regulatory burden and decreased per patient revenue, the market became limited to very large physician groups, entrepreneurial providers, or remotely located medical facilities,” he said. According to Frazier, the market is changing now for several reasons: a dramatic growth in CLIA-waived products, advancements in technology, quality, and reliability, and the ability to make in-office testing financially feasible, and even profitable. Careside has developed an economical, cartridge-based analyzer that provides a broad menu, on-board QC, and an optional connectivity solution to interface POL data with remote LIS, HIS, and CIS systems.
Frazier also sees an increased interest among physicians in offering laboratory services as a way to improve the quality of patient care. “Many physicians feel that by performing their own testing, they can practice better medicine: you can render a better treatment decision while the patient is still in front of you. Processing the patient while they are in the office can also have a big economic impact by eliminating inefficiencies and closing the loop,” he said. Beckman’s McCauley speculated that physicians will ultimately realize these efficiencies when the majority of a routine testing menu is available for the office setting — and with available technology, that time may be close at hand.
Regulatory environment
According to a spokesperson from the American Medical Association (AMA), their organization neither promotes nor discourages physician office testing, positioning the issue as a business-based decision to be made by the individual member. However, the quality of testing in the POL setting remains controversial, even among physicians themselves. In a study performed in 1996, researchers reviewed data from 1,110 California POLs using results from a single proficiency-testing provider. They found the failure rate among POLs to be almost three times the rate of non-POLs, and about 1.5 times that of POLs who used laboratory professionals to either perform or supervise testing. Critics of this research claim that study design and how quality was measured largely explain these negative results. However, a goal of manufacturers today is to build enough safeguards into products that routine testing can be done without the need for those laboratory professionals who are in the shortest supply.
To support physicians who perform in-office testing, the AMA has been quite active in monitoring the effect of CLIA regulations, and has largely been critical of CLIA and its impact on quality and patient access to care. In a statement issued at a FDA public workshop in August 2000 on CLIA-waived criteria, the AMA declared that CLIA did not improve the quality of laboratory testing, and opposed additional restrictions on waived products, claiming they would further threaten patient access and quality care.
Despite this criticism, others feel that CLIA regulations have made a significant positive impact on quality. “Clearly, we support testing in physician offices to provide instant results and continuity of care for patients,” said Judith Yost, director of the Division of Laboratories and Acute Care Services at CMS, which is responsible for the certification of labs under CLIA. According to Yost, improving quality is the primary focus of CLIA, and biennial surveys of POLs by CLIA and other accrediting organizations have demonstrated a significant decrease in deficiencies over time. Yost credits this improvement in quality performance to a focus on education rather than just discipline and sanctions. In addition, the agency wants to provide more flexibility in allowing laboratories to choose the QC most appropriate for the technology they use, which may help POLs and other laboratories to improve the quality of testing.
Despite the regulatory hurdles imposed by CLIA, Yost has seen the number of offices offering laboratory services increase over time. “The dynamic has changed in healthcare, and CLIA is just one component. OSHA and managed care also impact the number of offices participating in laboratory testing,” she said. Because additional paperwork and user fees are the two aspects of CLIA regulation that have the most impact on POLs, the agency has simplified the process by increasing certification to a two year interval, and by abandoning the reapplication process – once certified, you are assumed to remain certified until notified otherwise. Also, the agency has sought to streamline the final CLIA rule, due out by the end of this year, to make it more user friendly.
Change brings opportunity
CLIA is not the only challenge that POLs, and health care providers in general, will face within the coming year. An additional question mark for POLs is the impact of Stark III, legislation that prohibits certain self-referrals. And in a more sweeping action, in 1996 Congress enacted the Health Insurance Portability and Accountability Act (HIPAA) that protects health insurance coverage for workers during employment changes or losses. The act also requires that any health care provider who chooses to submit or receive healthcare claims electronically must use a standardized format. In addition, healthcare providers have to ensure that this data remain private and secure, and that proper patient consent is received prior to the release of data. This push for standardization and security stems from the fact that at one time, close to 400 different electronic formats were being used to transmit claims data.
The impact of HIPAA on POLs remains to be seen. “The physician’s office is going to be working on becoming HIPAA-compliant in total, not with respect to lab versus non-lab services. If one can bill electronically using the proper transactions and formats for regular services, then lab services will follow along,” said Karen Trudel, director of the HIPAA project staff at CMS. However, if a POL transmits laboratory results, for example to another provider within a network, then the privacy and security provisions of HIPAA come into play. Some aspects of HIPAA may make it easier for physicians to provide and be reimbursed for testing services. According to Trudel, a new claims attachment electronic standard for laboratory services is under consideration. “This would allow the physician to communicate directly with a health plan to provide additional information should it be requested,” she said.
As electronic transmission of healthcare claims becomes standardized through implementation of HIPAA, more physicians may eventually find it easier to interface with healthcare plans of all types. In fact, within the last 12 to 14 months, Careside’s Frazier has seen a subtle shift in the insurance industry. “Managed care is appearing to become more flexible and more receptive to in-office laboratory testing,” he said.
As advances in technology create an impetus for more, and higher complexity, laboratory testing within the venue of the physician’s office, regulatory and cost issues will continue to shape the market. In the meantime, professional organizations are stepping up to the plate to help physician’s prepare for the future. “HIPAA, CLIA, DRGs and reimbursement create a large regulatory environment that physicians must deal with…there is an information overload, and we are positioned to help physicians keep up,” said Robert Martig, Ph.D., surveys division manager at COLA, a CMS-approved organization that accredits close to 7,000 POLs across the country. Originally formed to help POLs meet CLIA requirements, COLA sees its role in this new environment expanding. “We are getting into the HIPAA arena, …. and we are trying to bring together organizations that have expertise in diverse fields to offer a one-stop pool of resources,” said Martig. Despite efforts by stakeholders to simplify the issues and prepare for the future, one thing is certain: the POL market is in flux and exciting to watch as new technology brings the IVD industry ever closer to the physician, and more importantly, the ultimate end-user, the patient.
Louise Lazear is a freelance writer in Charlotte, N.C.
